Whether you live abroad, are a non-resident, or reside in the United States as a non-citizen, you still have the ability to open a business in this country. LLCs, or limited liability companies, are a great choice for this scenario as they are easy to form and are simple to create.
While the steps don’t change for non-citizens, there may be some additional hurdles to ensure you have all the necessary documentation and information. Once you have ensured everything is in compliance with the state and country’s regulations, you will be able to have a U.S. business of your own.
Who can own an LLC in the US?
The category of non-US citizens is broad, but there are specific people considered foreigners when it comes to starting an LLC in the United States. Non-citizens can form an LLC if they live in the United States or in another country as long as they meet the Internal Revenue Service (IRS) guidelines.
The IRS refers to anyone who is not a US citizen as an “alien,” a term that refers to anyone born in another country who does not hold US citizenship. This can be a resident alien, who lives in the United States and passes either the green card test or the substantial presence test. Both types of aliens can form an LLC, with the main difference being how you pay taxes.
To open a U.S. LLC, you do not need to live in the United States or be physically present, as long as you can complete the right steps and access online forms.
However, it is important to know that owning an LLC does not authorize a person to work in the United States unless you have completed the proper steps to obtain a visa and work authorization.
Why choose an LLC
LLCs are a very common choice for these individuals due to their structure.
The main draw of an LLC is that it offers personal asset protection to the business owner. Even if your business is brought into a lawsuit, has a significant financial obligation, or files for bankruptcy, your personal money and assets will not be used to fulfill these debts. This protection allows you to start a business without great personal risk.
Compared to something like a US corporation or a c corporation, the work required to maintain a U.S. company that’s an LLC is less intensive. You will not need to elect a board of directors, hold shareholder meetings, or record meeting minutes with an LLC. While there are other requirements to fulfill for a foreigner starting an LLC, this requires less paperwork and upkeep than other structures.
Starting an LLC in the United States is a great way to become a part of the world’s largest economy and gain access to a large market. For some industries, a formal operation in the United States can lend credibility that helps a business grow and thrive.
LLC tax structure
While LLCs maintain some benefits of a corporation, like asset protection, they are able to benefit from a pass-through taxation structure. This means any profits and losses associated with the business are passed through to the members of the LLC, avoiding double taxation.
How to form an LLC as a non-US citizen
The majority of the process to start an LLC as a foreigner is the same as it would be for a United States citizen, but there are a few slight differences. The entire process is outlined below.
1. Choose a state
Most people start a business in the state where they reside, but this may not apply when you live in another country. If your business will have a physical presence or an office, it is best to form an LLC in that state in order to avoid additional complexity. If this is not the case, you can choose any state.
It is advisable to choose a state without state taxes so that you only need to worry about filing federal taxes. For this reason, Wyoming, Nevada, Florida, and Delaware are popular options. Remember that each state has its own tax rates and laws as well as laws about businesses like what licenses you may need.
2. Name your LLC
States will have different rules about what a business can and cannot be named, but it is universal that you must pick a name not already in use. Each state may have a registry that you can search to ensure you are not using a name that already exists, and it can be helpful to search for things like URL availability or nationwide trademarks as well.
An LLC will need to include the phrase “limited liability company” or an abbreviation in its formal name.
3. Find a registered agent
A registered agent is a person or business that sends and receives legal documents and other paperwork on behalf of a business. In many cases, the person starting an LLC is the registered agent for the business, but if you are not in the country, this is not an option. If you do not have a contact who is a resident of the state where you are filing, you can use a registered agent service to hire one on your behalf.
4. File your LLC with the state
To officially form a business, you must file all relevant documents with your state. The most common version of these documents is known as Articles of Organization or a Certificate of Formation. Your documents will outline the organizational structure of your business and provide all the basic information that the state requires.
5. Create an LLC operating agreement
Most states do not require an operating agreement as a part of the filing requirements for an LLC, but it is recommended to complete one. An operating agreement is a legal document that will outline ownership and operating procedures for an LLC, which ensures everyone is in agreement and reduces the risk of future conflict. This can be especially important if one member of an LLC is not physically present while others are.
6. Obtain an EIN
An Employer Identification Number is a nine-digit number issued by the IRS that is used to identify a business for the purpose of federal taxation. The process to apply for an EIN online is simple, but will require a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) as well as a US address.
For non-US resident business owners, you can submit an application through fax or mail. This will allow you to choose an option to designate yourself as a foreigner and circumvent the requirement.
7. Get a US mailing address
Many tasks associated with your business will require a physical mailing address. If there is a physical office in the state, you can use this address for all necessary paperwork. But if you do not have an office, you will still need to obtain an address. A P.O. box is not considered sufficient for this requirement.
Some online services like Earth Class Mail will provide a real address and even scan mail for you to view when it arrives.
8. Open a US bank account
This step can be complex and require travel to the United States, as banks need to avoid any potential money laundering scams and have requirements in place for this purpose. Once you have your EIN and have formed your business, contact the bank of your choice to ask what documents will be required to start an account in your situation. You will likely need to visit the United States to complete this process.
If you have a personal bank account in the United States, your bank may allow you to open a business account without travel, but this is not guaranteed. You do not need to use a bank in the same state as your LLC, which can offer some flexibility.
Taxes as a foreign-owned LLC
Any LLC that does business in the United States will need to file and pay federal taxes, no matter where the entrepreneur resides. Most states will require the same if they have any taxes at the state level. The way these taxes are calculated can vary based on the way your LLC has been formed.
In a single-member LLC, the pass-through entity structure of the business means that the owner’s income tax statements will reflect all profits and losses of the business. IRS Form 1040 is where this is typically reported for citizens and resident aliens, and non-resident aliens will need to use IRS Form 1040NR.
Non-resident aliens will also need to file two additional forms: Form 5472 and Form 1120. While these are typically only filed by corporations, a foreign-owned entity will also need to file them in order to allow the IRS to keep a close eye on the business. Even if the business has no income to report, these must be filed annually.
A multi-member LLC will be considered a partnership for tax purposes. This means the LLC will need to use Form 1065 and Schedule K-1 to report profits and losses for each partner. These forms replace Forms 5472 and 1120. If the LLC has source income connected to a US trade or business, they may also need to complete additional forms 8804 and 8805. Each owner will continue to report their share of profits on personal tax returns.
Taxes as a foreign-owned LLC can be complicated, so it may be a good idea to work with a tax expert for guidance.
Yes, anyone can open an LLC in the United States. The process and tax requirements will vary based on if you reside in the US, what your citizenship or resident status is, and how many owners the business has. However, starting an LLC in the USA does not mean the owner can move here to conduct business automatically.
Yes, any LLC that has been formed in the United States will need to pay all federal and state income taxes applicable to the business. This includes personal income taxes, even if the person is not typically required to file in the United States.
All additional filing requirements that US business owners must meet, like filing an annual report, are also applicable.
Technically, you can use your company’s name and address as a registered agent when forming an LLC. However, it may not be feasible as someone would have to be physically present at the place of business during standard daytime hours to accept and forward government documents. Most foreign LLC owners choose to use a registered agent service to avoid this.
The legal address of your business can be anywhere in the world and you do not technically need a physical mailing address in the United States. But to do things like open a business bank account or take out a loan, most institutions will require a physical address that is not a P.O. box.
The process of starting an LLC can be done entirely via online forms, fax, and mail without the need to be physically present. A registered agent service can allow you to receive mail and documents without being physically present. However, opening a business bank account in the United States typically requires you to visit the bank in person, so a trip is often necessary.
You would need to follow standard regulations to work in the United States, such as obtaining a green card or a work authorization and visa. Owning an LLC does not allow you to claim employment in the United States and reside in the country without all formalities taking place.